ML19329D270
| ML19329D270 | |
| Person / Time | |
|---|---|
| Site: | Davis Besse, Perry  |
| Issue date: | 10/12/1976 |
| From: | Goldberg J, Lessy R, Vogler B NRC OFFICE OF THE EXECUTIVE LEGAL DIRECTOR (OELD) |
| To: | Atomic Safety and Licensing Board Panel |
| References | |
| NUDOCS 8002260877 | |
| Download: ML19329D270 (15) | |
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UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION BEFORE THE ATOMIC SAFETY AND LICENSING BOARD In the Matter of
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THE TOLEDO EDIS0N COMPANY and NRC Docket Nos. 50-346A THE CLEVELAND ELECTRIC ILLUMINATING )
50-500A COMPANY
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50-501A (Davis-Besse Nuclear Power Station,
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Units 1, 2 & 3)
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THE CLEVELAND ELECTRIC ILLUMINATING )
NRC Docket Nos. 50-440A COMPANY, ET AL.
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50-441A (Perry Nuclear Power Plant,
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Units 1 & 2)
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COMMENTS OF NRC STAFF ON UNDATED MEMORANDUM OF UNDERSTANDING BETWEEN CEI AND THE CITY 0F CLEVELAND By Order dated September 20, 1976, this Board directed the parties to consider the impact of the intended acquisition of the Cleveland municipal electric system by the Cleveland Electric Illuminating Company (as evidenced by the Memorandum of Understanding attached hereto) on the parties' Proposed Findings of Fact and Conclusions of Law.
Although an undated Memorandum of Understanding between CEI and the City has been executed, the Memorandum constitutes little more than an option agreement in that CEI's offer to purchase MEL"P does not l
constitute a fim offer until authorized by the Board of Directors of CEI (see para. 8 of Memorandum). Likewise, the City's agreement to sell MELP is subject to the express approval and authorization by the l
Council of the City of Cleveland.
It is the Staff's understanding,in 4
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addition, that if.the City Council approves the sale, municipal law provides the mechanism for a direct referendum in the City of Cleveland concerning the sale.
Last, inasmuch as the Memorandum was executed in connection with the settlement of a private antitrust action before the United States District Court for the Northern District of Ohio, it is also subject to the prior approval of the District Court. These con-ditions and circumstances, in Staff's view, may well prevent or substan-tially delay the consummation of the acquisition.
The recently-concluded evidentiary hearing clearly established that the acquisition of MELP has long been a CEI corporate goal and that CEI deliberately denied MELP the benefits of coordinated operation and develo'pment in order to force the sale of MELP tc CEI.
Thus, the possible sale of MELP to CEI arises in the context of a situation inconsistent with the antitrust laws. Without appropriate antitrust relief as recommended in Staff's Proposed Findings, the City must choose between having their system acquired or continuing to struggle against CEI's abuse of its dominant position. Thus, a timely decision by the Board orderinh appropriate relief would make available to the City a meaningful alternative to the Hobson's choice between continued operation, without the benefits of coordinated operation and development and access to essential resources, and acquisition by CEI.
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. r If the acquisition ~is however consummated in the interim, Painesville will become the last surviving entity in CEI's area, and Staff's Proposed Findings (and suggested relief) with respect to Painesville will become of paramount importance.
Respectfully submitted, g es; s +
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Benjamin H. Vogler Assistant Director
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Antitrust Division, OELD W
r Counse/Lessy,Jr.V'/ '
Roy P l for NRC Staff if Jpck R. Goldberg C6unsel for NRC Staff Dated at Bethesda, Maryland this 12th day of October 1976.
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Between THE CITY OF CLEVELMID An'.
THE CLEVELAND ELECTRIC ILLCIINATING COMPMiY WHEREAS, the City of Cleveland (hereinaf ter " City") and The Cleveland Electr'ic Illuminating Company (hereinaf ter "CEI") are the Plaintiff and a Defendant, respectively, in an antitrust action now pending before the United States District Court for the Northern District of Ohio, being Civil hetionNo.C75-560onthedocketofsaidcourt;and WHEREAS, the City and CEI are also engaged in n.u=erous other legal and administrative actions with claims and counterclai=s being made by each of the contending parties; and WHEREAS, subsequfnt to the commencement of said litigation, the City and CEI have conducted various negotiations with respect to the resolution of. the aforementioned litigation, including the sale of part or all of the facilities of the Municipal Electric Light Plant (hereinafter "MELP"),
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owned by the City; and WHEREAS, as a result of the foregoing, the Administration of the City and the canagement of CEI have reached an agreement in principal with respect to the sale of MELP to CEI; NOW, THEREFORE, it is-agreed by and between the City, through its Hayor on behalf of the Ad=inistration of the City of Cleveland, and CEI, through its. President on behalf of the canagement of CEI, that:
1.
As consideration of the sale, transfer and conveyance to CEI of the assets of MELP described in Paragraph 2 hereof, CEI shall* pay to the City the sum of $158,500,000, payable as follows:
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(a), $38,500,000 shall be paid in cash co the City at.the closing of this transaction; and (b) The balance of $120,000,000,to be paid to the City at the rate of $4,000,000 per annum, adequately secured, payable on the last day of each year, l
commencing December 31, 1977.
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2.
The City shall transfer and convey to CEI all property, l I
plant and equipment of MELP, including land, set forth as J-assets in the December 31, 1975 balance sheet of MELP, l
excluding cash on deposit in the City. Treasury, which
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includes operating funds, sinking funds and encumbere,d bond funds, as agreed upon by R. W. Beck & Company and
" Gilbert Associates, Inc. (consultants to th'e City and CEI, respec.tively), subject to the following terms and conditions:
(a) MELP shall guarantee that its gross accounts receivable shall be not less than $3,500,000.
(b) The net book value of all other current assets of MELP shall be not less than ninety percent (90%)
of 'the net book value as of December 31, 1975, provided that any of said current assets which shall have been incorporated in or become a part of the property,, plant and equipment transferred hereunder shall not be deemed to diminish the value of current assets. The unaudited book value as of l
December 31, 1975 for all other current assets was as follows:
- Cur [ent Assets Unbilled & heerued Receivables
$ 847,696 Accrued Interest Receivable 45,370 Stores Materials & Supplies
$3,080,655 Less Reserve for Obsolesence 394,021 2,686,634 Prepaid Expense 57,796 Undistributed Work Orders 216,268 (c) The book value of the property, plant and equipment of HELP at the date of transfer shall be not less than $52,513,196, the book value of such property, plant and equipment as of December 31,
,1975, adjusted fo'r~ normal depreciation and normal additions and retirements.'
N' (d) HELP shall guarantee that the gross unencumbered funds reserved for plant expansion as shown in bond construction accounts on December 31, 1975 shall not be less than $984,570, unless reduced by expenditures
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or certification of funds for property, plant and equipment after January l', 1976.
(e)
If upon audit as hereafter provided, the gross accounts receivable to be transferred to CEI are less than $3,500,000, or if the net book value of all other current assets is less than ninety percent (90%) of net book value as of December 31, 1975, as adjusted pursuant to Section 2 (b) hereof, or if the gross unencu=bered funds reserved for plant expansion as shown in bond construction accounts on December 31, 1975, is les's than $984,570, unless reduced by expendi-tures or certification of funds for property, plant
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and eq jment after January 1, 1976, e if the book value of the property, p1' ant and equipment of MELP at the date of transfer is less than $52,513,196, the book value of such property, plant and equipment ad o'f December 31, 1975, adjusted for normal deprecia-tion and normal additions and retirements, a deduction in the amount of said deficiency shall be made from CEI's initial cash payment of $38,500,000 at the time of closing.
3.
IfCEEatitssolediscretiondeterminestodisposeofany interest in real property bordering upon Lake Erie (hereinafter "lakefront land") transferred by the City at the closing of this transaction, CEI shall, before dis' posing of its interest in said lakefront land to any other person or entity, notify the Mayor of the City in writing. of its intent to dispese of its interest in said lakefront property and offhr to the City s
the opportunity to repurchase said. interest in land at its then appraised value.
If the City is interested in the repur-chase.of said interest in lakefront property, it shall so notify the President of CEI in wr'iting within, thirty ('30) days of the receipt of said notice from CEI.
The repurchase price shall be established by a recogni::ed real estate appraiser mutually agreed upon by the City and CEI. Said interest in lakefront property may be repurchased at said appraised price by the City.
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4.
CEI agrees to edploy not less than eighty (80) qualified i
HELP employees, who shall be designated by CT.I n.in seven (7) days from the date of the passage of a ratifying ordinance by Council and employed by CEI at the time of the closing of this transaction, it being understood that any ceployees of }ELP in an occupation coming within the purview of CEI's collective bargaining agreement shall, as a condition of their employment by 'CEI, join Local 270 WUA for collective bargaining purposes.
, If any MELP employee designated by CEI declines employment, CEI l
shall be' obligated to hire another FELP employee in-his or her
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stead, the tenor of this Pa'ragraph 4 being that upon the
.. consummation of this transaction, CEI shall have employed not less than eighty (80) MELP employees.
- 5. "The City agrees that it shali pay to CEI from the down
. payment specified in Paragraph 1. (a) hereof, all noneys owing to CEI, except a sum not to exceed * $10,000,000, which may be withheld and paid to CEI upon the following terms and conditions:
The City shall pay to CEI any balance owing to CEI over a period of thirty (30) years, or during such lesser period as the City shall determine, with interest on the unpaid balance of principal and interest computed annually at three-quarters (3/4) 'of the Cleveland Trust Company prime rate as of January 1 of each yea'r, com=encing January 1, 1977. In no event shall the City be required to pay interest in excess of'a rate of eight percent (8%)
per annum.
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Th principal amount owing to CEI sail be.
amortized by.cqual annual paynents up to'a maximum of thirty (30) years. Larger principal pa;-...ts may
, be'made by the City at any tLse, and payments of interest owed by the City may be deferred by the
. City at its sole discretion for the initial period
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. of. five (5) years, provided that ultimate payments of such deferred interest must be made in a manner
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which insures equal amortization of the deferred
. interest payments over the remaining years of the City's obligation to CEI. The first payment by the City pursuant to this paragraph 5 shall be made on December 31, 1977, with subsequent payments to be
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made on the last day of each succeeding year.
6.. Prior to the date of the transfer of the assets of the Division of Light and Power to the Company, the City will have conducted at its expense a certifie'd audit of the assets of the Division of Light and Power by the public accounting firm of Peat-Marwick-Mitchell & Co.
CEI may retain at its own expense the public accounting firm of' Price, Waterhouse & Co.
to make its own independent audit and to review any accounting records, working papers or other information pertaining to
,said audit or the results of said audit as may be necessary to render its own opinion.
Any differences shall be recon-ciled by the respective independent public accountants as of January 10, 1977.*
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The terms of the present street lighting service contract between the City and CE'I shall be extended as fol.ows:
, (a) With respect to street lights presently serviced and maintained within the City by CEI, the terms of the' present contract shall be extended through December 31, 1977.
(b) With respect to street lights presently serviced and maintained by MELP, the terms of the present street lighting contract between the City and CEI adjusted for size and type of fixtures where necessary shall be applicable through December 31, 1978.
--(c)
On and after January 1, 1979, all street lights within the City now serviced and main-tained by either CEI or MELP shall be controlled
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by the rates and conditions established in the street lighting service contract next negotiated by.the City and CEI effective on and af ter J'anuary 1, 1978.
It is further ngreed that CEI shall provide electricity for vater pumping and all other City accounts at the lowest industrial
.. rate where applicable, otherwise, at the prevailing approved rate schedule for the particular use involved.
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8.
The tr. ~ action contemplated by this if-orandum and I
the terms herein set forth shall be authorized.by the Board of Directors of CEI not later thn 0-
' a-k,1976 and shall thereafter constitute a firm offer by CEI to the City of the terms and conditions hereof, which offer
.shall remain in effect through and including January 10, 1977. This transaction shall also be subject to authorization
.by the Council of the City not later than November 30, 1976.
.9.
As a condition of the transfer of the assets by the City and the payment of money by CEI, as hereinabove described, the City will make provision for the discharge of what is now estimated to be $10,164,180, constituting principal and interest upon }!ortgage Revenue Bonds of the City of Cleveland secured by the-Indenture of !!ortgage between the City of Cleve-land and the Union. Bank of Commerce Company, as, Trustee, dated October 1,1948, and as supplemented by Supple = ental Indentures s
of iforegage dated October.1, 1954, August 1, 1960, and January 1, 1963, respectively. The City cay satisfy said lien and Mortgage at the time of the execut, ion of the sale documents, either by making direct payment to the Trustee.of the principal and interest on said Bonds, or the City may, in its sole discretion, authorize and direct CEI to make payment, on 'the City's behalf,
'. to said Trustee or to an escrow agent designated by the City from the proceeds of the initial gross payment of $38,500,000, of an amount sufficient to satisfy the principal and interest due and g
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f.9 owinr,upon said lien and Mortgage. All benefits or savings resulting from the discharge of said Mortr,sge Revenue Bonds, whether discharged directly by the City or from the initial gross payment, shall inure to the benefit of the City.
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- 10. Contemporaneous with the closing of this transaction, CEI l
and the City shall take all necessary steps to terminate with l-prejudice their participation in all litigation before either administrative agencies or courts of law and to extinguish all money judgments or other claims or disputes between them 4
arising as a consequence of the City's operation of MELP.
- 11. The transaction contemplated by this Mc=orandum of Understanding shall be closed on or before January 10, 1977, unless further extended by agreement of the parties.
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C OF CL:, ' LAND By 1
/Axi
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/ Mayor.
' DIE CLEVELAN ELECTRIC ILLUltINATING COMPANY h
/1 Q.
By J
Presiden I
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UNITED STATES OF AMERICA NUCLEAR REGULATORY COMMISSION BEFORE THE ATOMIC SAFETY AND LICENSING BOARD In the Matter of
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THE TOLED0 EDISON COMPANY and NRC Docket Nos. 50-346A THE CLEVELAND ELECTRIC ILLUMINATING )-
50-500A COMPANY
)
50-501A (Davis-Besse Nuclear Power Station,
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Units 1, 2 & 3)
)
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THE CLEVELAND ELECTRIC ILLUMINATING )
NRC Docket Nos. 50-440A COMPANY, ET AL.
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50-'441A (Perry Nuclear Power Plant,
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I Units 1 & 2)
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CERTIFICATE OF SERVICE I hereby certify that copies of COMMENTS OF NRC STAFF ON UNDATED MEMO-RANDUM 0F UNDERSTANDING BETWEEN CEI AND THE CITY OF CLEVELAND, in the above-captioned proceeding have been served on the following by deposit in the United States mail, first class or air nail, or, as indicated by an asterisk, through deposit in the Nuclear Regulatory Commission's internal mail system, this 12th day of October 1976:
Douglas V. Rigler, Esq.
Atomic Safety and Licensing Chairman, Atomic Safety and Board Panel Licensing Board
. U.S. Nuclear Regulatory Commission Foley, Lardner, Hollabaugh Washington, D.C.
20555
- and Jacobs 815 Connecticut Avenue, N.W.
Docketing and Service Section Washington, D.C.
20006 Office of the Secretary U.S. Nuclear Regulatory Commission Ivan W. Smith, Esq.
Washington, D.C.
20555
- Atomic Safety and Licensing Board Joseph J. Saunders, Esq.
U.S. Nuclear Regulat'ory Commission Antitrust Divis. ion Department of Justice Washington, D.C.
20555 Washington, D.C.
20530 John M. Frysiak, Esq.
Atomic Safety and Licensing Steven M. Charno, Esq.
Board Melvin G. Berger, Esq.
U.S. Nuclear Regulatory Commission Janet R. Urban, Esq.
P. O. Box 7513 Washington, D.C.
20555
- Washington, D.C.
20044 i
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Reuben Goldberg, Esq.
Terencc i: :_
s, Esq.
David C. Hjelmfelt, Esq.
A. Edward Grashof, Esq.
Michael D. Oldak, Esq.
Steven A. Berger, Esq.
Goldberg, Fieldman & Hjelmfelt Steven B. Peri, Esq.
1700 Pennsylvania Avenue, N.W.
Winthrop, Stimson, Putnam & Roberts Suite 550 40 Wall Street Washington, D.C.
20006 New York, New York 10005 Vincent C. Campanella, Esq.
Thomas J. Munsch, Esq.
Director of Law General Attorney Robert D. Hart, Esq.
Duquesne Light Company 1st Assistant Director of Law 435 Sixth Avenue City of Cleveland Pittsburgh, Pa.
15219 213 City Hall Cleveland, Ohio 44114 David Olds, Esq.
Reed, Smith, Shaw & McClay Gerald Charnoff, Esq.
Union Trust Building Wm. Bradford Reynolds, Esq.
Box 2009 Robert E. Zahler, Esq.
Pittsburgh, Pa.
15230 Jay H. Bernstein, Esq.
Shaw, Pittman, Potts &
Lee A. Rau, Esq.
Trowbridge Joseph A. Rieser, Jr., Esq.
1800 M Street, N.W.
Reed, Smith, Shaw & McClay Washington, D.C.
20036 Madison Building - Rm. 404 115515th Street, N.W.
Frank R. Clokey, Esq.
Washington, D.C.
20005 Special Assistant Attorney General Edward A. Matto, Esq.
Room 219 Richard M. Firestone, Esq.
Towne House Apartments Karen H. Adkins, Esq.
Harrisburg, Pa.
17105
' Antitrust Section 30 E. Broad Street,15th Floor Donald H. Hauser, Esq.
Columbus, Ohio 43215 Victor F. Greenslade, Jr., Esq.
William J. Kerner, Esq.
Christopher R. Schraff, Esq.
The Cleveland Electric Assistant Attorney General Illuminating Company Environmental Law Section 55 Public Square 361 E. Broad Street, 8th Floor Cleveland, Ohio 44101 Columbus, Ohio 43215 Michael M. Briley, Esq.
James R. Edgerly, Esq.
Roger P. Klee, Esq.
Secretary and General Counsel Fuller, Henry, Hodge & Snyder Pennsylvania Power Company P. O. Box 2088 One East Washington Street Toledo, Ohio 43604 New Castle, Pa.
16103 Russell J. Spetrino, Esq.
Paul M. Smart, Esq l
Thomas A. Kayuha, Esq.
Fuller, Henry, Hodge & Snyder l
Ohio Edison Company 300 Madison Avenue i
47 North Main Street Toledo, Ohio 43604 Akron, Ohio 44308 i
. John Lansdale, Esq.
Jerome Saltzman, Chief Cox, Langford & Brown Antitrust and Indemnity Group 21 Dupont Circle, N.W.
U.S. Nuclear Regulatory Commission Washington, D.C.
20036 Washington, D.C.
20555
- Alan P. Buchmann, Esq.
Squire, Sanders & Dempsey 1800 Union Commerce Building Cleveland, Ohio 44115 l6 Lc
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[dackR.Goldberg
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N Counsel for NRC Staff 9
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